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. Last Updated: 07/27/2016

Business in Brief

Moody's Upgrades

LONDON (MT) -- Rating agency Moody's Investors Services has upgraded its rating for Russia's Eurobonds to B2 from B3, Interfax reported Thursday.

The agency also changed the outlook for its ratings for all Russian sovereign debt instruments to positive from stable.

Moody's said that Russia's "recent economic performance and tax reforms have generated twin surpluses [current account and budget], and large foreign currency reserves."

Combined with debt relief, these factors have greatly improved the country's ability to service its debt, the agency added.

But "significant uncertainties exist," Moody's said. "Capital flight continues unabated, little enterprise restructuring has occurred and banking system reform remains to be addressed."

Prices for Russian Eurobonds jumped on the rating news. The spread between Russian bonds and U.S. Treasuries shrank by 4 basis points to 813 points.

CB Issues OBRs

MOSCOW (Reuters) -- The Central Bank returned to the debt markets with its first new bond issue for three years Thursday and was given a cautious reception by wary investors.

It held two auctions of OBR bonds, and both were undersubscribed, although dealers welcomed the yield premium the central bank gave over its deposit rates.

The Central Bank stopped issuing OBRs in November 1998 after a tax of 0.8 percent of the issue volume was introduced. The tax was lifted earlier this year. The Central Bank auctions offered 2 billion rubles each of two-week and three-week OBR paper.

Licenses to Be Revoked?

MOSCOW (Vedomosti) -- The Natural Resources Ministry will revoke oil extraction licenses for 12 deposits the Yamal-Nenetsk autonomous district -- including ones currently held by a LUKoil subsidiary, a ministry official said Thursday.

The ministry was discussing the failure of companies to use their licenses in the district. Of 37 oil-extraction licenses, only 10 are being used.

LUKoil-controlled Arkhangelskgeoldobycha held licenses to deposits with crude reserves of 100 million tons (730 million barrels).

Yamal-Nenetsk Governor Vladimir Butov said the federal budget was losing $500 million annually, or $1 for each ton of unextracted crude.

PM: Inflation to Fall

MOSCOW (Reuters) -- Prime Minister Mikhail Kasyanov said Thursday he was convinced inflation would keep falling this year, although price rises are overshooting government targets.

The government has been forced to revise its 2001 budget target of 12 percent to 14 percent for annual inflation to 16 percent to 18 percent. Analysts say it is more likely to be 20 percent.

Month-on-month inflation in August was zero, down from 0.5 percent in July, although analysts said this was seasonal.

Kasyanov also said gross domestic product growth was 5 percent in August, in line with a government forecast for economic expansion this year of 5 percent to 5.5 percent.

Budget Surplus Falls

MOSCOW (Reuters) -- Russia's budget surplus dropped to 1.5 percent of gross domestic product in the first eight months of 2001 versus 1.6 percent of GDP in the first half, the Finance Ministry said Thursday.

Russia, which aims for a balanced budget this year, ran a surplus of 85.1 billion rubles ($2.89 billion) in the first eight months of this year, the ministry said in a statement.

The ministry said Russia ran a budget deficit of 11 billion rubles or 1.4 percent of GDP in August alone.

The primary surplus, calculated before debt payments, amounted to 263.1 billion rubles, or 4.7 percent of GDP, in January to August.

Alrosa Profit Warning

MOSCOW (MT) -- Diamond monopoly Alrosa's net profits for 2001 will shrink by 34.3 percent year on year to 6.519 billion rubles ($220 million), Interfax reported the company as saying Thursday.

Alrosa blamed the unscheduled cost of rehabilitating the flood-ravaged city of Lensk in Yakutia, where the company is based, for the drop in profits. Alrosa had originally projected higher net profits than in 2000, but it had to adjust its figures in August.

The company is anticipating pretax profit of 10.909 billion rubles and is expecting to pay 4.39 billion rubles in tax.

Alrosa has budgeted 3 billion rubles for the cleanup operation in Lensk, where it will build 1,200 new apartments and a new embankment .

Alrosa mined $1.623 billion in diamonds in 2000. Net profits came to 9.93 billion rubles.

Reserves Up $500M

MOSCOW (Reuters) -- Foreign currency and gold reserves rose to $500 million in the week to Aug. 31 to $37.5 billion, the Central Bank said Thursday.

BBH to Up Investment

MOSCOW (Vedomosti) -- Baltic Beverages Holding, one of the largest beer producers in Eastern Europe, expects to boost its market share in the region by investing $150 million to $200 million in Russia and Ukraine in 2002, company president Christian Ramm-Schmidt said.

"This is almost equal to our investment during the previous two to three years," he said.

Ramm-Schmidt said about 75 percent of this will be invested in developing the company's facilities in Russia, which should result in the market share growth here by between 3 percent and 4 percent. He also said the company plans to set up a brewery in Russia's Far East and in Belarus.

Putin to Talk Business

MOSCOW (MT) --- President Vladimir Putin is expected to meet with U.S. businessmen in Houston during his official visit to the United States, tentatively scheduled for mid-November, Itar-Tass reported Thursday, quoting diplomats in Washington.

Putin and U.S. President George W. Bush are expected to focus on issues related to strategic offensive weapons and U.S. plans to build a national missile defense system. It was the Russian party's request to include visits to Washington and Houston, the diplomats said.

Blacklist Blues

MOSCOW (Reuters) -- A global money-laundering watchdog may rule this week that Russia should not escape a blacklist of financially murky nations -- despite passing a law to fight dirty cash, a Russian daily said Thursday.

The business daily Vedomosti quoted Yury Chikhanchin, the head of currency controls at the Finance Ministry, as saying the Financial Action Task Force would probably leave Russia on its blacklist but hold back on a threat to impose sanctions.

In June, the FATF, an arm of the Group of Seven leading industrial nations, gave Russia, the Philippines and the island nation of Nauru until the end of this month to crack down on money laundering or face possible sanctions.

Russia's government sped a money-laundering bill through parliament and President Vladimir Putin signed it into law last month. But it may not be enough when the FATF rules Friday.

Vedomosti said FATF delegates had said in June that a law alone would not get Russia off the list without solid evidence of whether and how it would be enforced.

A source in the FATF Russian delegation had told reporters Wednesday that delegates arguing the country's case with the watchdog expected it to lift its threat of immediate financial sanctions.

TNK's Slavneft Sale

MOSCOW (Vedomosti) -- Tyumen Oil Co. has sold a part of its shares in Russian-Belarussian state-controlled Slavneft and its subsidiaries, sources close to the deal said.

The buyers are Russian Aluminum shareholders, Urals Metals and Mining Co. and structures close to Slavneft management.

TNK began buying up the Slavneft shares in spring last year. By summer it had managed to consolidate 12.8 percent of the shares of the holding and major stakes in its principal subsidiaries.

At the start of the year a special company was created to which TNK transferred its shares in Slavneft and Slavneft subsidiaries. TNK itself received only 25 percent in the new company.

The remaining shares were equally distributed between three groups of owners. According to one source, these were structures close to the co-owners of RusAl -- Oleg Deripaska and Roman Abramovich -- and structures close to Slavneft management.

Another source said one of the participants to the transaction was not Oleg Deripaska, but the joint owners of the Urals Metals and Mining Co. -- Iskander Makhmudov and Mikhail Nekrich.